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City, county agree to help pay for Red Line as cost rises to $2.9 billion

Public TransportationLaws and LegislationHighway and Road TransportationFinanceKevin KamenetzHarborplaceStephanie Rawlings-Blake

Baltimore city and county leaders announced Tuesday that they are committing a combined $280 million to fund construction of the Red Line light rail even as the estimated cost for the project has ballooned to $2.9 billion.

The local contributions are considered critical for the Woodlawn-to-East Baltimore transit line to proceed. As federal transportation funding has dwindled in recent years, officials prioritizing infrastructure improvements around the country have favored projects that include state and local cost sharing.

"Federal funding is not what it used to be," said Maryland Transportation Secretary James T. Smith. The city and county buy-in gives the state "the opportunity to demonstrate to Washington that, in fact, this is a major commitment for the local jurisdictions, that it will impact multiple jurisdictions."

State officials also said Tuesday that they plan to use a public-private partnership to help underwrite the cost of the project, which previously had an estimated price tag of about $2.65 billion. Under those arrangements, the private sector would provide construction funding in exchange for future contracts to operate and maintain the line.

The proposed 14.1-mile light rail line, part of which would be underground, has been in the works since 2011 and is projected to open in 2022.

Repeated increases in the Red Line's projected cost have been fodder for critics and were a sticking point for Baltimore County Executive Kevin Kamenetz as recently as last month, when he publicly challenged the state's handling of the project.

Henry Kay, the Maryland Transit Administration's executive director for transit development and delivery, said the increases were unexpected.

For example, the state must spend $58 million to build a stronger station in Fells Point after finding higher-than-anticipated underground water pressure. The state also found it must spend $30 million more to build a deeper tunnel under downtown after finding metal cables extending outward from the underground parking garage walls of 111 S. Calvert St., remnants from the Harborplace tower's construction.

Benjamin Rosenberg, a resident who lives near the proposed path of the Red Line and is a member of the Right Rail Coalition, which has argued for a more cost-efficient approach to public transit in the city, said recent cost increases show the state doesn't have a handle on them.

Rosenberg said he is concerned that taxpayers will be asked to pick up more of the cost if private partners do not come forward, and he expects more increases, particularly as the state starts boring the tunnel.

"Who knows what's down there?" he said.

But Kay said he does not expect further major cost increases because the state has completed about 65 percent of its design work for the Red Line and most of the underground work.

"The size of what we don't know is getting pretty small," he said.

Under the local commitments made Tuesday, the city plans to contribute $230 million, up from an initial request from the state for $200 million. Mayor Stephanie Rawlings-Blake, a longtime proponent of the project, said the city's contribution would be made without raising taxes or introducing new fees for city residents.

"I'm excited about moving forward," Rawlings-Blake said. "I believe in the Red Line's ability to grow jobs and build Baltimore."

Kamenetz made the county commitment of $50 million in a letter to Smith. It represented a stark reversal from one month ago, when Kamenetz balked at the state's request for $50 million and said the county would contribute only $26.5 million, entirely through in-kind contributions such as paying for sidewalk construction.

In the letter to Smith, Kamenetz said the county would meet the $50 million request but reiterated his objections. He said county officials only learned in March that they would need to contribute cash.

The request came at time when the county's budget is strapped, Kamenetz said. The county has made "a substantial commitment" to increase its debt ratio to fund $1.1 billion in school construction, Kamenetz wrote.

"Thus, I continue to be disappointed that local governments are now expected to contribute to this project when that was never explained to us during any of the planning stages of the Red Line," he wrote.

Kamenetz declined to comment beyond the letter.

Smith said the state would continue to negotiate with the county — in part because it now wants to raise the county's contribution to $60 million. "We're going to have to talk about the additional $10 million, but that's certainly a doable conversation," Smith said.

Kay said state officials worked to persuade the city to contribute $30 million more to help cover the project's higher overall cost.

State law requires the two local jurisdictions to contribute 10 percent of the overall cost of the project. Local buy-in was a key selling point in attracting about $900 million in federal funding for the project, state officials said.

For years, the state has been working to build two large transit projects: the Red Line and the proposed Purple Line connecting Montgomery and Prince George's counties outside Washington. Both have been prioritized for federal funding, and the state has issued a request for proposals for public-private partnership bids on the estimated $2.4 billion Purple Line.

The state wants a private Purple Line partner to cover $500 million to $900 million in costs in exchange for a long-term contract to design, build, operate and maintain the system for 35 years.

State officials said the Red Line partnership would be more limited, in part because outsourcing the work would cost more because the state would have to pay a premium for a private entity to take on risks involved in boring the tunnel.

Still, the state now expects to rely more extensively on private investment not just for operation and maintenance but also design and construction.

The private partnership contribution would offset the cost of the project to the state, which is planning to cover the balance after local and federal contributions.

Kamenetz's proposal commits $17 million in in-kind contributions in 2016, including water and sewer line relocations and installing traffic signals, and the rest in cash payments starting with $5 million in 2018 and $5.6 million each year through 2023.

The county executive reserved the right to terminate that agreement if the federal government does not meet its funding commitments or if the project's Baltimore County portion "fails to materialize."

The city is contributing $80 million in cash from Federal Highway Administration funds and state toll credits. The city receives such funds in part because it maintains its own roads, unlike counties that rely on the State Highway Administration, Kay said.

The city is expected to waive $58 million in fees for the use of the city's right of way, landfill and other services that the state would otherwise have to pay for. City officials also agreed to cover $52 million in utility construction and relocation costs, $26 million for capital projects, and $14 million in property acquisition and relocation costs.

"It was a tough three months of negotiations and creativity and long hours of conversation before we got to this point, but we're very excited to be able to do it ... without increasing taxes or having a negative impact on residents here," said William Johnson, the city's transportation director.

"We're moving on all fronts," Smith said. "It's really exciting in the sense that the local jurisdictions are coming on board in a big way, and the project is moving ahead steadily."

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Copyright © 2014, The Baltimore Sun
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Public TransportationLaws and LegislationHighway and Road TransportationFinanceKevin KamenetzHarborplaceStephanie Rawlings-Blake
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